Professional Documents
Culture Documents
1 Assignment-Students
1 Assignment-Students
Instruction:
a. Assignment should be uploaded on the UMS portal on or before 15th November 2015.
b. Assignment in no case will be accepted after the last date of submission.
c. The answer should be typed on word and the calculation based can be solved on excel
and the same can be pasted on the word file.
d. Only one file will be entertained for assignment (i.e. word file with solved excel sheet
pasted in the same file.
e. For the critical answering avoid plagiarized content as marks will be deducted for same.
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4. A portfolio with a level of systematic risk the same as that of the market has a
beta that is
a. equal to zero.
b. equal to one.
c. less than the beta of the risk-free asset.
d. less than zero.
5. Which one of the following statements is NOT true about common stock?
a. Common-stock holders have the right to vote on the selection of the board of
directors for the firm.
b. Common stock is considered to have no fixed maturity.
c. Owners of common stock are guaranteed dividend payments by the firm.
d. Common-stock holders have limited liability.
SECTION B
Calculation based
(5x2=10)
Ques. 2 Ross wants to buy a car worth 50 000 by financing it over a period of 36 months. The
bank offers Ross an interest rate of 20% per annum, compounded monthly. They also offer him a
6 month grace period.(I.e. Ross does not have to pay anything until 6 months have passed,
however, interest will still be charged during the grace period, from the beginning of the finance
contract. Assume an ordinary annuity is in effect where necessary.) Calculate his monthly
installment.
Ques. 3 Analysts following the Tomkovick Golf Company were given the following
information for the years ended December 31st, 2014 and December 31st 2013:
2014 2013
Assets
Cash and marketable securities $ 33,411 $ 16,566
Accounts receivable 260,205 318,768
Inventory 423,819 352,740
Other current assets 41,251 29,912
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Goodwill and other assets 382,145 412,565
In addition, it was reported that the company had a net income of $ 3,155,848 and that
depreciation expenses were equal to $212,366 during 2014.
a. Construct a 2014 cash flow statement for this firm.
b. Calculate the net cash provided by operating activities.
c. What is the net cash used in investing activities?
d. Compute the net cash provided by financing activities.
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Section C - Critical Thinking
(4 x 2.5 = 10)
Ques. 4 Explain what the standard deviation of returns is and why it is especially useful in
finance, and calculate it for an asset.
Ques. 6 Describe what the Capital Asset Pricing Model (CAPM) tells us and how to use it to
evaluate whether the expected return of an asset is sufficient to compensate an investor
for the risks associated with that asset.
Ques. 7 Explain what the weighted average cost of capital for a firm is and why it is often used as
a discount rate to evaluate projects.
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